Tipping waiters in restaurants after a meal, is a common practice. The money goes to the waiters directly and is a gesture to recognise their service and motivate them. However, today, the scene has changed. Most restaurants include mandatory “service charges” in the bill, which most of us are not even aware of!
In a restaurant, we look at the menu card and order items we fancy. They are brought to the table and we are liable to pay for what we have ordered. When we pay the price for the food, why are service charges included? It means no tips for the waiters. But do the waiters benefit from the charges or do the restaurant owners become richer? I am sure the service cost is already included in the cost of the food. Why pay, an additional charge? The tip, which was optional, is now made compulsory with the “service charges” and is not fair to the consumers. Another issue related to this is allowing restaurants to charge above MRP for packed food items, which includes drinking water, about which we had discussed earlier.
As of today, the restaurant owner is free to fix any amount he pleases as service charges and it generally varies from five per cent to 10 per cent. The service charges are required to be displayed on the menu card and only then can it find a place in the final bill. May be we should object to paying service charges as in the case of Taveras in New York. Taveras was not satisfied with the service offered at a restaurant. After paying the food charges, he refused to pay the required $13 tip. The restaurant owners called the police, who then arrested Taveras and charged him with theft. But the district attorney had those charges dropped immediately, stating that any gratuity is by its nature discretionary.
In a similar case that occurred in Pennsylvania, a group of college students went to eat at a pub, alleged lousy service and refused to pay the demanded 18 per cent tip. They were arrested and the district attorney reversed course, saying it was not a case worth prosecuting because tips are generally voluntary.
As against the service charge that is a fabrication of the hospitality industry, there are other charges that we are obligated to pay and go to the government. The service tax, for instance, is a government-levied cess. Tax is applicable on 40 per cent of the bill amount.
It is 12.50 per cent approx. and therefore, we will have to pay 4.94 per cent (12.50 x 40per cent) of the entire bill (including service charges), as service tax. Also, please note that only AC restaurants can charge service tax.
In addition, we pay Value Added Tax (VAT) that is applicable only to food items prepared inside the restaurant. This will not apply to packaged food items. VAT, again, should be charged on the food bill and service charges, and should not include the service tax.
Thus, all these charges increase the final bill by 25-30 per cent. It is very important that we check bills to make sure that all charges and taxes are computed properly as per rules so that we do not end up paying even more.
The writer works with CAG, which offers free advice on consumer complaints to its members. For membership details/queries contact 24914358/24460387 or helpdesk@cag.org.in
